10/15. The Federal Communications Commission
(FCC) announced that the Commission adopted a Report and Order approving SBC's
Section
271 application to provide in-region interLATA
service in the states of Illinois, Indiana, Ohio and Wisconsin. The FCC issued a
brief
press release [MS
Word], but not the Report and Order. The release
says little about the Report and Order.

On August 26, the Department of Justice's (DOJ)
Antitrust Division submitted its
evaluation [PDF] to the FCC in which it wrote that "Because serious issues
remain concerning SBC's ability to render accurate wholesale bills, the
Department is not in a position to support SBC's application based on the
current record. The Department does not, however, foreclose the possibility that
the Commission may be able to satisfy itself regarding these issues prior to the
conclusion of its review."

Meanwhile, AT&T, which will now have to compete
with SBC in these four
states offered its long distance customers in these four states "30 minutes of
free domestic long distance calling on us for a month". See, AT&T
release.

This is FCC WC Docket No. 03-167.

4th Circuit Holds That Policy
Covering Property Damage Does Not Extend to Damage to Software

10/15. The U.S. Court of Appeals
(4thCir) issued its split
opinion [21
pages in PDF] in AOL v. St. Paul, a dispute over whether an
insurer (St. Paul)
has a duty to defend and indemnify its insured (AOL) in a collection of lawsuits brought by
AOL users alleging that the version 5.0 of the AOL internet access software had
substantial bugs, and was incompatible
with their computers' other applications software and operating systems, causing
the computers to be damaged. The District Court ruled that St. Paul had no duty
under the insurance contract to defend and indemnify. The divided Court of
Appeals affirmed.

AOL purchased insurance from St. Paul Mercury Insurance Company. The relevant language
of the policy provides that St. Paul will "pay amounts" that AOL "is
legally required to pay as damages for covered ... property damage."

The policy defines property damage as physical damage to tangible
property of others, including all resulting loss of use of that property; or
loss of use of tangible property of others that isn't physically damaged.

The policy also includes an "impaired property" exclusion that
provides that St. Paul is not obligated to cover property damage to impaired
property, or to property which isn't physically damaged, that results from faulty
or dangerous products or completed work, or a delay or failure in fulfilling the
terms of a contract or agreement.

Numerous lawsuits were filed against AOL, most
of which were consolidated into a single multi-district action in the Southern
District of Florida. AOL tendered the defense of these actions to St. Paul, which denied
coverage. AOL settled the claims. AOL also filed a complaint in
U.S. District Court (EDVa) against St. Paul
alleging wrongful denial of coverage. This is a contract action based upon diversity
of citizenship, to which Virginia law applies.

The District Court granted summary judgment to St. Paul on
the grounds that the computer users' underlying complaints did not allege
physical damage to tangible property within the meaning of the insurance policy,
and that any damage from loss of use of tangible property fell within a policy
exclusion.

AOL appealed. It argued, unsuccessfully, that damage to software is physical
damage to tangible property. The Appeals Court affirmed the District Court. Judge
Niemeyer wrote the opinion of the Court, in which Judge Wilkinson joined.

Judge Traxler wrote a long dissent. He
argued that "Whether computer software should be considered tangible or
intangible property is a difficult question that has yet to be definitively
answered by the state courts. In my view, however, it is unnecessary to even
reach that question, because the allegations of the underlying complaint
sufficiently allege damage to the computers themselves, thus bringing the
claims against AOL within the scope of the policy’s coverage for claims of
``physical damage to tangible property of others.´´ Accordingly, I respectfully
dissent."

This case is America Online, Inc. v. St. Paul Mercury Insurance Company,
Nos. 02-2018 and 02-2084, appeals from the
U.S. District Court for the Eastern District of Virginia, at Alexandria, Judge
Gerald Bruce Lee presiding, D.C. No. CA-01-1636-A.

Sen. Wyden used the occasion to describe and promote
S 877, the
"Controlling the Assault of Non-Solicited Pormography and Marketing Act of
2003", or "CAN-SPAM Act". This bill, which is sponsored by
Sen. Conrad Burns (R-MT), Sen. Wyden, and
others, was amended and approved by the Senate Commerce Committee on June 19,
2003. See,
amendment in the nature of a substitute [36 pages in PDF]. See also, story
titled "Senate Commerce Committee Passes Spam Bill" in
TLJ Daily E-Mail
Alert No. 685, June 20, 2003.

There are numerous other spam related bills pending in the Congress. See,
story titled "Spam Bills Pending in the House and Senate" in
TLJ Daily E-Mail
Alert No. 696, July 11, 2003.

Pinder reviewed spam and privacy related legislation in the European Union
and the United Kingdom. He said that the U.K.'s legislation, which flows from an
EU Directive, will become effective in December. He summarized that
"unauthorized spamming will be an offense", that "people will have a right not
to get spam unless they opt in", and that "there is an exception for
relationships with existing customers".

He continued that in addition to the legislative ban, there needs to be
international cooperation to deal with cross border issues, and new
technological innovation, such as firewall and anti-virus technologies.

"Finally, we have started to make links between spamming, on the one hand,
and the spread of viruses, on the other", said Pinder. "We regard spamming not
just as a matter of nuisance, or a matter of offense, but also, in some
respects, a matter of national security. Some of our e-mail systems are at
threat through viruses. And many viruses spread using the same techniques as
spam. Therefore, one can't really distinguish between the two things. One has
got to attack all of it together."

He was also asked to comment on legislative proposals pending in the Congress
that would include opt out, rather than opt in, systems. Pinder responded that "We
understand why you are taking the approach that you are doing."
He added that "We
felt that opt in was the strongest. It seems to be acceptable to our business
community. And, therefore, that is what we are going with. But having said that,
what we are most concerned with, is not whether your legislation is the same as
ours, clearly, given the different contexts."

Andrew Miller, a Member of Parliament who attended the luncheon, then rose to address the U.S.
Constitution, its First Amendment, and the implications for the regulation of
spam. He said that "The question that you need to pose to yourselves, perhaps, is did your
forefathers, when drafting this fantastic piece of work, really intent the
phrase about Congress not making laws to abridge the freedom of speech actually
intent -- of course, they didn't -- did they have the intent to allow people to
bombard your homes obscene pormography, to force my 84 year old mother, an
invalid living on her own for whom the internet is a great freedom tool. Why
should she be forced, as she said to me when I left for this trip, why should
she be forced to receive adverts for Viagra.

Miller continued, "Now, this was not in minds of the authors of the
Constitution. And what we need to find is a way around this. So, the answer is
not in having a debate about who is right and who is wrong in terms of opt in
opt out. We all recognize that we have got a very very serious problem that is
disrupting businesses. We have got evidence of that. To a degree, it is an
offense and an affront to the dignity of many families, and we have got to find
practical ways of making our law enforcement agencies cooperate to overcome
these difficulties. The opt in opt out argument is a nice academic one, but that
isn't going to solve the problem that we are all facing."

The FTC's Beales addressed the nature of the spam problem, and what the FTC
is doing about it. He stated that "much of it is already clearly illegal".
He said that the FTC has studied spam and found that two thirds, on its face, has some obvious
false claim. He added that other spam has other problems, such as offers for the sale of
prescription drugs without a prescription, or offers for the sale of illegal
cable descramblers. He concluded that only 16 percent of the spam in a sample
studied by the FTC did not have some clear problem.

"It is also important to look at who the spam is coming from", said
Beales. The FTC
studied domain names of those sending spam, and found that none of the senders were Fortune
500 companies. "We are not dealing with legitimate businesses interested in
obeying the law. We are dealing, to a considerable extent, with often clearly
fraudulent operators, who know perfectly well what the law is, and have chosen
to hide behind the anonymity that e-mail makes possible in order to engage in
fraud. Part of the difficulty is that e-mail can be sent from anywhere, to
anyone in the world, and the recipient doesn't know who sent it."

Beales continued that "A big part of the problem today is that it is
possible to stay right here and
look like your message came from abroad, by bouncing it off of open relays or
open proxies somewhere else around the world."

So, Beales explained that the strategy of the FTC in pursuing fraudulent
spammers is "to follow the money."

"If you want to get money from people, then they have to send that money
somewhere, somehow in the real world", said Beales. "So, we look for where is the money
going. And that has been typically the person that we have prosecuted."
However, he added that once they found this person, assets were usually
dissipated.

But he said this is difficult. First, domain names are registered with false
information. He stated that "you have to try to follow the billing
information. But that may be false too. Or, it may be a stolen credit card
number. What we typically find in our investigations, is ten or fifteen, or
sometimes even more sequential subpoenas as we peel the onion, if you will, to
try to figure out where in the real world is the person who is actually doing
this. We can do it, but it is slow, and time consuming ..."

Pinder was asked about the Whois database, which lists contact information
for domain name registrants. Much of the data submitted is false. Beales
responded that the Whois database "is our starting point in all of these
investigations." He also said the "we have been closely involved with the Whois
issue, because it is very much an enforcement problem for us."

Beales continued that "On the other hand, it is not reasonable to require a full
investigation of
every domain name registration by the registrars. I think it could make a
practical difference, like pull the registration, once you find out that is
phony. And, it would help our enforcement efforts considerably. I don't know
what the fraction is, but there is ... a surprising number of domains that
Mickey has registered."

Beales also answered a question about the idea of a do not e-mail registry similar to the
telemarketing do not call registry. He praised the do not call list, but added that "we
could not say the
same thing about a do not spam list. We can say with considerable confidence
that do not call will reduce the number of unwanted calls you get, and it will
do it noticeably and significantly and, we think, fairly quickly. We have no
confidence at all that that would be true about a do not spam list. And, in
fact, the Chairman has said, that his advice to consumers, if there was one, was
don't waste your time spending the time to sign up. We just don't think it will
work."

AOL's Curran reviewed some of the tools that spammers use to evade the
technological measures intended to filter spam. He covered the generation of
false header information, abuse of free e-mail services, open proxies and
relays, and zombie networks. He stated that open proxies are "currently the
dominant form of abuse"

Snow Addresses Executive Stock Options

10/15. Secretary of the Treasury
John Snow gave a
speech to the
Conference Board in
New York City in which he addressed, among other topics, stock options for
corporate executives. He did not, however, address stock options for rank and
file workers, or accounting issues pertaining to stock options.

Snow
(at right) stated that "In retrospect, the whole mess might be understood in
part at least as an extension of efforts to tie management compensation to
corporate performance. That was the original rationale for most stock option
grants, and options serve a good purpose, up to a point. But somewhere along
the line they got out of hand. Stock options came to be viewed as a ``freebie,´´
and every economist knows that anything free will be consumed to excess."

"Then, of course, we had the irrational exuberance of the stock market in the
late 90s, which led to option payouts far beyond the grantors -- or grantees --
imaginations. Over-reliance on options and the market bubble created the
``perfect storm´´ for corporate America."

"I do not mean to indict stock options", said Snow. "There is a
role for options. But
options were intended to motivate long-term behavior. They were meant to tie
executive compensation to the long-term success of an enterprise. Instead, they
too often became a vehicle for near-term cash payouts. Unfortunately in many
cases they shortened the time horizon of management and accentuated the
``short-term-itis´´ that addicted the markets in the 90s."

"Their original purpose was twisted, and in many cases managers and boards
failed to show the common sense or judgment to back down from the excesses."
Snow added that "Public reaction was predictable when managers walked off with
millions upon millions after exercising options in companies that then proceeded
to unravel -- companies such as Enron, WorldCom, Global Crossing, and Tyco -
once darlings of Wall Street.

He concluded that "Corporate America suffered a setback from which it is
still reeling. Today, the issue of compensation is center stage. Compensation
policy has not yet been fully and appropriately addressed. Addressing it must be
a priority for every corporate board."

There are numerous bills pending in the Congress pertaining to stock options.
See, for example,
HR 1372
and S 979,
the "Broad-Based Stock Option Plan Transparency Act of 2003", and
S 182 and
HR 626,
the "Ending the Double Standard for Stock Options Act".

He spoke about the creation of the Cyber Security Tracking Center and
Computer Emergency Response Team (which will work in partnership with
Carnegie Mellon's CERT, the
Homeland Security
Advanced Research Project Agency (HSARPA), and the
appointment of Amit Yoran as Director of the National Cyber Security Division of
the Information Analysis and Infrastructure Protection office.

Ridge (at right) stated that
"as we think about our vulnerabilities, we have to think about redundancies. I think
that one of the, the notions that we have in our Department, and we think about it all
the time, is the combination of a cyberattack and a physical attack. You can imagine,
given the interdependency -- just emergency services alone, responding to a physical
attack -- how that could complicate our mission to save lives."

He observed that "the enemies of freedom use the same technology that we
do."

He also reviewed several of the things the Department of Homeland Security
has done in the area of cybersecurity. He said, "We've created a Cyber Security
Tracking Center to monitor incidents and coordinate our nationwide response.
We'll be aided by our Computer Emergency Response Team, or U.S. CERT." He added
that "It's a new partnership with Carnegie Mellon University, which will grow to
include many members of the business community. We're going to need your help
here. We can't get this done by ourselves. The connections you make, and the
network you establish in support of the U.S. CERT will go a long way in helping
us achieve our goal of reducing our vulnerability to cyberattacks."

Ridge continued that "I want to say we are also going to continue to invite more companies to
join these information-sharing and analysis centers. They are critical to our
effort to secure the homeland. We will continue to inform them of new threats
and incidents."

He also talked about the HSARPA. He stated that "we don't have it completely
configured the way we want it yet, but the notion that on an annual basis, we
will be investing hundreds of millions of dollars in a similar fashion, to take
advantage of the creativity and innovation of this country, I think is -- should
give you, and certainly Americans, some comfort that we don't have the solution,
it's out there and it's on the way."

He also talked about the appointment of Amit Yoran. (See, September 15, 2003
release of DHS
announcing appointment of Yoran.)

Ridge said that "he was a highly respected -- he's a member of your
alliance. He was out of the -- actually, he started the company and sold it to
Symantec. ... So he's actually going to oversee our cyber security operation
within the Department."

People and Appointments

10/14. Nancy Higgins was named EVP of Ethics and Business Conduct and
Chief Ethics Officer of MCI WorldCom. She was previously VP, Ethics and Business
Conduct, for Lockheed Martin. She will report to Ch/CEO Michael Capellas.
See,
release.

10/15. President Bush nominated Robert McFarland to be Assistant
Secretary of Veterans Affairs (Information & Technology). He was previously VP
for government relations with Dell. See, White House
release.

9:30 AM or 10:00 AM? The
Senate Judiciary Committee will
hold an executive business meeting. The agenda includes consideration of Henry
Saad to be a Judge of the U.S. Court of Appeals (6thCir), George Miller
to be a Judge of the U.S. Court of Federal Claims, and Dora Irizarry to be a
Judge of the U.S. District Court (EDNY). See,
notice.
Press contact: Margarita Tapia (Hatch) at 202 224-5225 or David Carle (Leahy)
at 202 224-4242. Location: Room 226, Dirksen Building.

RESCHEDULED FOR OCTOBER 30-31.10:00 AM. The House Ways and
Means Committee will hold a hearing titled "United
States - China Economic Relations and China's Role in the Global Economy".
See,
notice. Location: Room 1100, Longworth Building.

10:00 AM. The House Government
Reform Committee will hold a hearing titled "You've Got Mail -- But Is It
Secure? An Examination of Internet Vulnerabilities Affecting Businesses,
Governments, and Homes". Press contact: David Marin at 202 225-5074. Location:
Room 2154, Rayburn Building.

12:30 PM. The Congressional Caucus on Intellectual
Property Promotion and Piracy Prevention and former Commissioners of the
U.S. Patent and Trademark Office (USPTO) will
hold a press conference to urge the House leadership to schedule a vote on
HR 1561,
the "United States Patent and Trademark Fee Modernization Act of 2003",
a bill that would, among other things, end the diversion of USPTO fees. Press
contact: Lale Mamaux (Office of Rep. Wexlar) at 202 225- 3001 or
lale.mamaux@mail.house.gov.
Location: Room 505, Cannon Building.

3:00 PM. The House Judiciary Committee's
Subcommittee on Courts, the Internet, and Intellectual Property will meet to mark up
HR 3261,
the "Database and Collections of Information Misappropriation Act of
2003". Press contact: Jeff Lungren or Terry Shawn at 202 225-2492. Location:
Room 2141, Rayburn Building.

RESCHEDULED FOR OCTOBER 30-31. 10:00 AM. The
House Ways and Means Committee will continue its hearing titled "United
States -- China Economic Relations and China's Role in the Global Economy".
See,
notice. Location: Room 1100, Longworth Building.

2:30 - 4:30 PM. Federal Communications
Commission (FCC) International Bureau (IB) will
hold a public forum to examine the methods and practices the FCC used
in preparation for 2003 World Radioconference (WRC-03), and to assess whether
the process can be improved. The FCC seeks public views on how the FCC could
further facilitate public participation, increase transparency, intensify its
international outreach and generally promote public interest goals in the WRC
preparatory process. See,
notice [PDF]. Location: FCC, Commission Meeting Room (Room TW-C305), 445
12th Street, SW.

Deadline to submit requests to the Trade Policy Staff Committee (TPSC) to
testify at its November 5, 2003 hearing on negotiations with Bahrain on a free
trade agreement (FTA). The TPSC seeks comments and testimony to assist the
Office of the U.S. Trade Representative (USTR)
on many topics, including "Relevant trade-related intellectual property rights
issues that should be addressed in the negotiations" and "Existing barriers to
trade in services between the United States and Bahrain that should be
addressed in the negotiations". See,
notice in the Federal Register, August 25, 2003, Vol. 68, No. 164, at
Pages 51062 - 51064.

Deadline for the Federal
Trade Commission (FTC) to submit its brief to the U.S.
Court of Appeals (10thCir) in FTC v. Mainstream Marketing Service,
No. 03-1429. This is the telemarketers' constitutional challenge to the FTC's
do not call registry. See, October 8, 2003
order [24 pages in
PDF] staying the District Court's opinion, and setting an expedited schedule.

Sunday, October 19

Day one of a three day conference titled "Networked Economy Summit". See,
event web site
and agenda.
Location: Hyatt Regency Reston, Reston, VA.

Day one of a two day conference hosted by the Department of Commerce's
(DOC) Bureau of Industry and Security (BIS)
titled "16th Annual Update Conference on Export Controls and Policy".
Kenneth Juster, Under
Secretary for BIS, will speak at 8:30 AM. See,
notice
and
agenda. The price to attend ranges from $625 to $700. Location:
Renaissance Hotel, 999 9th Street, NW.

Day two of a three day conference titled "Networked Economy Summit". See,
event web site
and agenda.
Location: Hyatt Regency Reston, Reston, VA.

Day two of a two day conference hosted by the Department of Commerce's
(DOC) Bureau of Industry and Security (BIS)
titled "16th Annual Update Conference on Export Controls and Policy".
See,
notice and
agenda.
The price to attend ranges from $625 to $700. Location: Renaissance Hotel, 999
9th Street, NW.

Day three of a three day conference titled "Networked Economy Summit".
See, event web
site and
agenda. Location: Hyatt Regency Reston, Reston, VA.

TIME?
Joseph Liu (Boston College of Law) will give a lecture titled "Rationalizing
Trademark Defenses". This is a part of
Georgetown University Law Center's
(GULC) Colloquium
on Intellectual Property & Technology Law Series. For more information,
contact
Julie Cohen at 202 662-9871. Location: GULC,
600 New Jersey Ave., NW.

Deadline to submit reply comments to the
Federal Communications Commission (FCC) regarding its notice of proposed
rulemaking (NPRM) pertaining to its rules governing the provision of air
ground telecommunications services on commercial airplanes in order to enhance
the options available to the public. The FCC adopted this NPRM on April 17,
2003, and released it on April 28, 2003. This is WT Docket No. 03-103. See,
notice in the Federal Register, July 25, 2003, Vol. 68, No. 143, at Pages
44003 - 44011.

Deadline to submit requests to the Internal
Revenue Service (IRS) to speak at its October 23, 2003 hearing regarding
its notice of proposed rulemaking (NPRM) regarding computation and allocation
of the credit for increasing research activities for members of a controlled
group of corporations or a group of trades or businesses under common control.
The rules implement the research and development tax credit codified at
26 U.S.C. § 41.
See,
notice in the Federal Register, July 29, 2003, Vol. 68, No. 145, at Pages
44499 - 44506.

More News

10/15. The Federal Communications Commission
(FCC) announced the removal of one item from the agenda for its Thursday,
October 16, meeting. The FCC will not consider an Order to resolve issues raised in the Auction
No. 52 Comment Public Notice related to the FCC's authority to auction Direct
Broadcast Satellite (DBS) licenses and eligibility for the DBS licenses
currently available. See, FCC
release [PDF]. See also, the FCC
web page titled
"Auction 52: Direct Broadcast Satellite Service". This is AUC-03-52.

10/15. Rep. Tom Davis (R-VA),
the Chairman of the House Government
Reform Committee, wrote a letter to Stephen Perry, Administrator of the
General Services Administration (GSA),
regarding the General Accounting Office's
(GAO) report titled "Planned E-Authentication Gateway Faces Formidable
Development Challenges". He wrote to express concern with the progress of
the GSA's "implementation of its E-Authentication initiative and the challenges
associated with developing the E-Authentication Gateway, which is the
cornerstone of the initiative". Rep. Davis continued that "September 2003 was
the original deadline for the E-Authentication Gateway to be operational. That
goal has now been pushed back to March 2004. Based upon the limited progress
cited by GAO, there is real doubt whether this project can be completed, even by
the revised date. This raises many concerns because of the potential this delay
has to adversely affect the development of the other 24 OMB E-Government
initiatives."

10/15. Several interest groups praised
S 1709,
the "Security and Freedom Ensured Act of 2003", or SAFE Act. This is another
bill to roll back a few of the more controversial provisions of the USA PATRIOT Act.
It was introduced on October 2 by Sen. Larry Craig (R-ID),
Sen. Richard Durbin (D-IL),
Sen. Mike Crapo (R-ID),
Sen. Russ Feingold (D-WI),
Sen. John Sununu (R-NH),
Sen. Ron Wyden (D-OR), and
Sen. Jeff Bingaman (D-NM). See, story titled
"Senators Craig and Dubin Introduce Bill to Modify PATRIOT Act" in TLJ Daily
E-Mail Alert No. 753, October 6, 2003, and "Sen. Leahy Introduces Bill to Expand
List of Surveillance Provisions of PATRIOT Act to Be Sunsetted" in TLJ Daily
E-Mail Alert No. 757, October 14, 2003. The Senate Judiciary Committee has schedule a
hearing to examine criminal terrorism investigations and prosecutions
relating to national security for 10:00 AM on Tuesday, October 21. The groups
supporting S 1709 included the Center for Democracy
and Technology (CDT), Free Congress
Foundation (FCF), American Library Association
(ALA), the American Conservative Union (ACU) and others. See, CDT
release and ACLU
release.

10/15. The Progress & Freedom Foundation (PFF)
released a
report
[60 pages in PDF] titled "Taxes and Regulation: The Effects of Mandates on
Wireless Phone Users", by Thomas Lenard and Brent Mast of the PFF. See also, PFF
release.

10/14. Sen. John Cornyn (R-TX) and
Sen. Kay Hutchison (R-TX) introduced
S 1720, a
bill to provide for federal court proceedings in Plano, Texas. The bill was
referred to the Senate Judiciary
Committee. Plano was once a small town north of Dallas. It lies in the
Sherman Division of the Eastern District
of Texas. The Dallas Ft. Worth metropolitan area has grown to
encompass Plano, which now has a quarter million people, and the
facilities of many high tech companies. Almost all of the Dallas Ft.Worth
metropolitan area lies in the Northern
District of Texas. This bill would leave Plano in the Eastern District, but
amend 28 U.S.C. §
124(c)(3) to provide that the Court for the Sherman Division shall be held
at both Sherman and Plano. Plaintiffs frequently file lawsuits against large
technology companies with minimal ties to the Eastern District of Texas in the
Eastern District of Texas. See for example, Sendo v. Microsoft, Cisco
v. Huawei and FutureWei, Microtune v. Broadcom, BellAtlantic v.
AT&T, Intergraph v. Intel, McClure v. AOL Time Warner, MIT
v. Abacus Software, and many other cases. Although, the Texarkana Division
appears to be the most popular with plaintiffs' lawyers.

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